Transcript Economic indicators

ECONOMICS – DAY #2
BUSINESS MANAGEMENT
ECONOMIC INDICATORS
Objective
We will identify
basic micro- and
macro-economic
concepts in order
to understand
economic
indicators.
Essential
Questions
 What are economic
indicators?
 Explain the purpose of
measuring economic
indicators.
 Identify examples of
leading and lagging
economic indicators.
HOW DO YOU MEASURE UP?
Student
performance is
measured by:
Baseball
performance is
measured by:
 GPA
 Batting Average
 SAT
 Strikeouts
 Class Rank
ECONOMIC INDICATORS
 Economic indicators are figures used to
measure a country’s economic
performance.
 We measure things like:
how
much (goods & services) a country
produces
whether a country’s economy is growing
how a country’s economy compares to
others
EXAMPLES OF ECONOMIC
INDICATORS
RETAIL SALES INDEX
 Measures goods
sold within the
retail industry
 Does not include
money spent on
services
 Shows if consumers
are spending or
saving
GROSS DOMESTIC PRODUCT
 GDP is the total
market value of all
goods & services
produced within in
a country in a
given year.
 Changes show
whether the
economy is
growing or slowing
HOW DOES THE U.S. COMPARE?
GDP FUN FACTS
 Released the last
day of each
quarter
 Recently the U.S.
economy has
grown around
2.5 – 3 % per year.
INFLATION RATE
 Inflation is a
general increase in
the price of goods
& services.
 Indicates that the
cost of living is
getting more
expensive!
 Inflation Calculator
INFLATION FUN FACTS
 Measured by the
Consumer Price
Index (CPI) which
samples prices at
different stores
 Occurs when supply
is less than demand
 Federal Reserve
decides interest
rates in order to
adjust for inflation.
A LOOK AT INFLATION ACROSS U.S. HISTORY
WORKSHEET ACTIVITY
UNEMPLOYMENT RATE
 Measures number
of people who
are willing & able
to work but
cannot find a job
 Shows whether
economy is
picking up or
slowing down
CLOSING TASK #1
1)
2)
3)
4)
5)
What is the purpose of measuring
economic indicators?
Explain the difference between leading
indicators and lagging indicators –
include an example of each.
What does GDP tell us about the
economy?
What does the inflation rate tell us?
What does unemployment tell us?
THE BUSINESS CYCLE
Objective
We will identify
basic micro- and
macro-economic
concepts in order
to understand the
business cycle.
Essential
Questions
 What is the business
cycle?
 What are the stages
of the business
cycle?
 How is each stage
of the business cycle
characterized?
WHAT IS THE BUSINESS CYCLE?
 Economies naturally go through ups and
downs.
 The business cycle is the rise and fall of
economic activity over time.
 In the United States, some decades have
been characterized by a drop in
economic activity & a rise in
unemployment.
 1930s, 1950s, 1970s, 2000s
 Slumps followed by new waves of
increased productivity and increased GDP
STAGES OF THE BUSINESS CYCLE
PROSPERITY
 Also known as the
“peak”
 Higher wages, more
jobs available,
higher demand for
goods & services
 Unemployment is
low, GDP is high
 People are
spending!
RECESSION
 Economic activity
slows down – less
production of
goods, downturns
in industry
 GDP decreasing,
unemployment
increasing
 People are starting
to save!
DEPRESSION / TROUGH
 Deep recession that
lasts for years and
affects the entire
economy
 Unemployment is
high, GDP is low
 Government starts
trying to “stimulate”
the economy
 People are saving!
RECOVERY / EXPANSION
 Rise in business
activity after a
recession or
depression
 Innovation occurs –
businesses start
bringing out new
products & services
 Unemployment
decreasing, GDP
increasing
ENTREPRENEURS WHO ROSE FROM
THE ASHES
MANY OF TODAY’S FORTUNE 500 COMPANIES CAME FROM HARD
TIMES…
GENERAL MOTORS
 William C. Durant
High school drop-out
working as a Buick
manager in Detroit
Acquired Oldsmobile,
Cadillac & Pontiac
Launched Chevrolet
(later joined GM)
 The Panic of 1907
PLAYBOY ENTERPRISES
 Hugh Hefner
Former employee of
Esquire who quit
when his boss
refused to give him
a $5 raise
Designed his own
magazine with the
help of his friends
 Recession of 1953
SIRIUS SATELLITE RADIO
 Robert Briskman
Former NASA engineer
COO at Geostart (satellite
messaging company)
Figured out how to
broadcast digital radio
signals via satellite
Merged with XM Satellite
Radio in 2008 to provide
commercial-free radio 24
hours/day
 Early 1990s Recession
CLOSING TASK #2
What is the business cycle?
What are the stages of the business
cycle?
3) Identify which stage of the business cycle
is characterized by the following
indicators.
1)
2)
−
low GDP, high unemployment
declining GDP, rising unemployment
− rising GDP, declining unemployment
− high GDP, low unemployment
−
ECONOMIC CYCLES
Objective
We will identify
basic micro- and
macro-economic
concepts in order
to understand the
effect of
economic cycles.
Essential
Questions
 Which industries are
particularly affected by
shifts in economic
cycles?
 Describe durable goods
and provide examples.
 Explain the difference
between inelastic and
elastic demand.
SHIFTS IN ECONOMIC CYCLES
While the economy
as a whole is
negatively impacted
by economic shifts,
certain companies &
industries are
particularly sensitive
to changes overall.
DURABLE GOODS
 Consumers tend to cut back on the
purchase of certain products if the
ones they have already can last
through the recession.
 Manufacturers of durable goods like
cars, appliances, and electronics are
among the most impacted by
economic shifts.
EXAMPLE: TRANSPORTATION
GM, Ford, Chrysler, and other car
companies
Consumers put off buying new cars or they
purchase less expensive models.
United Airlines & British Airways
Airlines suffer in recessions because people travel less
overall.
FedEx & UPS
Volume in mailed packages declines during
recessions.
EXAMPLE: MANUFACTURING
Whirlpool & Sears
Home appliance
manufacturers are
subject to decline in
demand during
recessions.
Demand for
appliances is tightly
linked to new home
sales, which slows
during a recession.
EXAMPLE: CONSTRUCTION
Home Depot & Lowes
Performance of home improvement retailers is
also correlated to the housing market.
OTHER INDUSTRIES…
Investment
Services
Hotels
Luxury
Commodities
Advertising Firms
INELASTIC DEMAND
 Certain goods are relatively protected
from the impact of shifts in economic
cycles.
 Goods that have relatively inelastic
demand with respect to income are
generally shielded.
 You still have to eat, drive to work, etc.
EXAMPLES OF INELASTIC DEMAND
Food
Manufacturers &
Retailers
Addictive
Substances
Medicine &
Medical Equipment
Utilities
CLOSING TASK #3
1) Describe durable goods.
2) Provide an example of an industry
that is significantly impacted by
economic shifts.
3) Describe inelastic demand.
4) Provide an example of an industry
that is relatively unaffected by
economic shifts.